tv Retirement Board 81016 SFGTV August 17, 2016 10:30am-12:01pm PDT
kneeling action. >> good afternoon, party people. want to welcome you back to san francisco employment retirement system. i hope you are excited to be here, as i am. i'm malia cohen, the newly reelected body. iment to introduce brian stansbury, our new vice president of the body and i like to begin with the pledge of allegiance. please join me in rising and place your right hand over your heart. >> i pledge allegiance to the flag of the united states of america and to the republic, for which it stands, one nation, under god, indivisible,
with liberty and justice for all. >> mr. clerk applausee call the roll. >> commissioner cohen, here. stansbury, present. bridgess, present. driscoll, here. makras is out of town. commissionser myeiberger i believe isn't expecting and paskin-jordan is here. >> thank you very much. any announcements? no anounssments. please call the next item, ite >> item 3, closed session. >> thank you. ladies and gentlemen, on the calendar we go into closed session. i like to take public comment and closed session at this time.
get started. i'd like to entertain a motion not disclose what was discussed in closed session. is there a motion, colleague snz >> so moved >> motion moved by commissioner driscoll, seconded by paskin-jordan and without objection i like the house to note or the clerk to note the house is bridges, driscoll, cohen and paskin-jordan and without objection the motion passes unanimously. um, could we take mr. clerk call item number 4. >> item 4, general public comment. >> thank you. like to welcome anyone to come up for general public comment to talk about generally what is on your mind. you have two minutes to talk. i do have public comment cards in front of me. i have one,
richard hack. please, sir, come down. good to see you. good afternoon. >> i have a few points to cover. first of all, hedge funds sounds to me like throwing a billion dollars down a hole. i think it gives aid and comfort to the jihad wages to publicicized public institutions especially the [inaudible] ones mptd we know modern economics muses higher mathematics. what is does is patiently spained to others like me and members of the board who are not conversant with math. the math gives looks that economic activity and brings new facktders into play. calculation and assessment. some are fascinateic in and of them sevl, however, there is the danger with too much reliance
on [inaudible] even on math instd of plain english we lose site oof had business fundamentals aench wn understand. the understanding conspt in sth universe can be praised in plain english. every jargon can be understood and used with practice and those professionals welcome a colleagues who speaks plainly and to the point and without too much terminology and strange phrasing. math and professional jargon can be used to [inaudible] in which they serve. when we have public comment here, the board listens but never replies. it would improve our communication i think if we formally devoteed 30 or 60 minutes of meeting time to a give and take, free wheeling and civil. maybe not every month but at least every quarter. >> 30 seconds. >> that is all i have to say.
>> mr. hack is the bodies rules to-prevents us from having conversation back with public comment. it is a opportunity for you to publicly comment and for us to receive it. if you are interested in on goeing conversation you can reach out >> student the member and can accept your offer to talk to them directly. we will have the clerk snd the information. i got your name and can get it at theened of the mooting. anyone else that like to speak in general public comment? how are you? >> herbt wineer. i just want to cumemd the board having the backbone to stand up for dirty san francisco upholding the [inaudible] pre-1996 retirees. it clearly is a moral division
and wish you the best of luck against the law firm so thank you again. >> thank you mr. wineerf had i think that was a compliment. when we deal with hedge funs we were spineless. anyone else want to speak on public comment? come on dow. public comment is closed. thaurng so much. next item >> item 5, action item, approval of minutes july 13, 2016 retirement board meetingfelt >> how do you feel about the minutes, ladies and gentlemen? motion to move and second by paskin jorder and motion by bridges. yes, sir? mr. driscoll >> there is a sentence talk about the cola lawsuit [inaudible] one component of what i was trying to say is i
was unable to interpret the judges division without adding language, therefore could not reach a plain language interpretation. i thought that is a important piece how i got to making the motion and supporting it. i don't think it is captured in the sentence. if the minutes could be amndsed to capture thatsentance i appreciate it. >> we will do that. >> let's take a motion to accept the minutes as amended. alright. motion made by bridges, seconded by paskin-jordan and want the house to reflect stance burg is not with us. what is next on the ajendsa? >> item 6, action item, consent calendar. >> consent calendar. anyone have objections or changes,
comments, amendments? nope. a motion to accept the consent calendar. motion made by mr. driscoll, seconded by bridges and without objection the motion passes. let's take pub lic comment. seeing none, public comment is closed. thank you. without objection that motion passes unanimously. mr. clerk, how about item number 7. >> item number 7, action item rks review aruvl to obtain black rock for investment management short and long duration. >> thank you madam chair and i'll get right to the subject at task. [inaudible] if they have comments to make to the board. i will pass it to unis as we look at ways to structure
the portfolio [inaudible] >> good afternoon commission rs. what you have is a recommendation to approve two u.s. government [inaudible] one is shirt duration exposure and long duration exposure for san francisco fixed income portfolio. in the recommendation we have 4 products for the boards consideration and stated staff preference is for the board to approve the two non [inaudible] treasure index in separate account structure, 1-3 year index and [inaudible] 52 percent of block rock intermediate government bond index and 40 percent of long term bond index, non lendable strategy. as stated, neither preferred product will
participate in security funding. [inaudible] provide protection by eliminating risk associated with securityfundings a a purpose of both products is for san francisco to use as the source of liquidity. we accept the short duration product to fund benefit payments and capital calls and cash needs and expect to use the long duration to provide protection for theport folio. both products will use to had improve the credit quality and providing liquidity for the plans. [inaudible] we included them in the recommendation for the boards consideration. the near term for both products come from the liquidation from the [inaudible] along with additional funding from the cash account. with that, i turn it over for additional comments.
>> i would just uniss memo covers the issues quite appropriately but there are 3 conditions. one is this appropriate long term strategy, two is the execution suggested here, and did we pick the best manager at the best cost. from the strategic standpoint we talked about the low rate environment and [inaudible] and have a very very bullet proof treasury adjustment oriented piece and longer term credit oriented piece so with respect to that strategic objective that does exactly that and talked about that a while ago. in terms of the excigez of 1 to 3 year and 10 year blends, the one to 3 year is the most bullet proof source of liquidity we can have in the environment so thij the mix suggested here is also appropriate. you see the numbers that securities lending
you give up a little return, but i would remind you that particularly on the 1 to 3 year piece, this is the piece liquidity we want when we want the money today we it it today and don't want to have the recall securities and face delay. you are giving up modest return but remember what you went through in the crisis. you give up return but get the kindf liquidity the strategy advocates so we are comfortable. vendor choice, that is easy, black rock is the largestveneder in the world in this type of business and this is a business at scale. the more you do, the more efficiency and training. black rock is the largest vendor oindex products. even if we did a search going beyond your
initial list, i doubt we would have found anybody with as competitive fee for the execution capability they bring. this will be a fairly significant part the overall portfolio but the capabilities they operating are computer oriented activities not subject to personnel loss and the type of thing youz face in active management. >> just to sum up for 30 seconds, this is the next tool of investment in our fixed income between moving from credit sensitive issues that have now [inaudible] towards higher yielding but private debt, longer duration assets and substituting that with super low risk, completely liquid instruments in which
stripped away. the illiquidity that can sometimes comprise from securitieslanding. i will note we are in the midst of increasing private equity and real assets portfolio so this is a tool for luquidly when we have expected capital callsism . i think today we had a $37 million capital call. was it today? two days ago. we need cash or short term securities to do that. anymore questions? >> policies about how many dollars or percentage the total portfolio can give to any one manager? is this violate across the limit? >> i don't think the gets to the limit. black rock is sth
largest relationship in terms of the [inaudible] >> security lending program there is a certain amount of reduction for income level versus the demand mr. martin-[inaudible] >> i believe so, yes. >> that effects the motion and hopefully will be made and i'll stop. thank you. >> anyone else? thank you. this is a action item. colleagues, is there a motion or action we can take on this? move the item, thank you. yes, mr. driscoll >> we need to clarify if this is a frndly amendment we retain the black rock u.s. government investment management for 1 to 3 treasury and non lending and
10 year government band index non lending. >> alright. >> [inaudible] >> okay. let's take public comment. anyone like to comment on this? please do so. seeing none, public comment is closed. like it record to reflect commissioner bridges recused from the vote. >> we don't have a second yet. we have a motion with proposed friendly amendment >> i'll second the motion. >> the motion to recuse is super seeds the other motion. there is- >> i move to rekoos commissioner bridges >> seconded by paskin-jordan without objection please note the house changed and have
stansbury. without objection the motion passes . recuseal [inaudible] leave the room for the vote? >> don't go anywhere, you'll be back in 30 seconds. >> alright. thank you. let's take another motion. mr. driscoll can you restate your motion? >> on the recuseal or second sth >> the second. >> i accept his proposed amendment >> perfect, thank you. are we clear on that? alright.
there was no public comment and um-- >> am i seconded his? >> you made the motion, he hasn't 2nded by puscon jordan seconded the amended motion >> without objection the motion passes. thank you. please let mrs. bridges know she can come back in. mr. clerk could you call item 8, please? >> thank you norm and madam chair. do i need to wait as we have 3 in the room? >> it is a quorum. >> very good. commissioners looking at the front page we had a great month in july. portfolio up all most 2 and a half percent and every asset
class was up. if you look year to date, meaning the calendar year to date we are up more than 4 and a half percent and fixed income up more than 6 percent, so it is a good year at least for the first 7 months. last month we reported for the fiscal year end, june 30 is returned only about 1.1 percent, but preliminary data is top cor tile. i want to turn your attention to the next page and i want to turn to the column titleed 731-16 allocation and if you drop down 3 quarters of the way down the page you note the investment cash is 4.3 percent and that is compliance with the max limit of 1 percent. the reason for that is we were pending todays vote on the treasury index so that will be taken care of
shortly after the board meeting. um, everything else is in compliance. do want to turn quickly to the graph that you'll see on monthly assets and you'll see we are roughly flat compared to where we were two years ago. it is self return environment. our return is pretty good relative to piers and this is benefit payments. it is a tough period. assets are increasingly, liabilities are rising and assets are flatlining. i do want to turn to the cio memorandum and touch upon some required disclosure, namely, in item number 3, on page 2 of the memorandum, cerberus we asked for investment of $100 million and
received $75 million and that closeed august one. fountainvest which is china based invesment and thrilled with that partnership and requested $100 million and got our full $100 million. cso we asked for $75 million and approved and received all $75 million. harvest mlp got really bludgeoned last year and early 16 so this is a contrarian play on recovery and they center reconched in recent month. junes we asked for $100 million and we received all $100 million on july 18. i have one additional disclosure to note that was closeed earlier just this morning or
yesterday afternoon. i think it closed yesterday but received notice today. that is on investment sova nova which is lete stage healthcare strategy and requested $50 million and got the full $50 million and that closeed yesterday. i note further on page 4, you see our various initiatives. this is just updated relative to what we provided to the board last month. this is what-this is our research agenda right here on page 4 and page 5. then you see the appendix beginning on page 6. this is sth same furnished to the board last munthd regarding the trade off between the cost of hedging equity portfolio and what it would have done over various time periods. we walked through this in detail last
month and providing this month for your reference and glad to provide information if you so desire. that completes the report. and, thank you for that report. mr. driscoll >> regarding item 9. [inaudible] 4 or planned investment meetings in the past there are inivistment committee meetings focus on education and public meetings to include the topic of absolute returns and some people call hedge funds which the public was invited to. in case the iletms do appear in the website, public ajebda and discussion, do you plan to continue that? >> yes, we do. i'm glad you mention that because chair woman bridges and i met about a week ago to plan for the agenda. we reviewed last year and plan for the current year
and have topics for each of these and absolute return is on the docket for september 21, twnt 16 and february 15, 2017. >> thank you. >> among several others. >> i didn't know we knew the dates. >> we put them down so you would know. please put them on the calendar. if you are unable to attend, please let jr and i know as soon as possible. it has actually been a little more than two years. it has
been-we started that process in april and may of 2014. that is when it started so it has been all most 2 and a half years. >> anyone else. mr. stansbury you have a question? no. let's open up to public comment on the cio report. mr. wineer -no one? okay. public comment is closed on this item on the cio report. is there a motion? motion on item 8? i don't need one? okay, thank you. it is discussion. thank you. alright. next up. item number 9 >> 9, discussion item, differ comp manager report.
>> thank you. >> good afternoon commissioners. before you is the monthly manager report we put together for you at every board meeting. i know you have probably had a lot of time to review this before the meeting but if you haven't i want to make a call out on the report to ayou. it is the fact the assets in the plan have actually grown $71 million in one month. that is partially do to the contributions as well as a bump in the market, so wanted to report that to the board. that is really all i had on the monthly report at this time. happy to answer any other questions you may have. >> let's see, anyone have a question so far? nope, okay. great. next item is loan program.
>> the loan program is on target for q 3 roll out so happy to report that. we are targeting theened of q 3 and currently working on system testing, which is basically looking at the back end processing over a complete pay roll cycle to insure the loan repayments are made on a timely basis. we are currently working on that and we are on target. >> have you heard anything back from members on the loan program and >> other than the great anticipation? yes, we are very very excited about it so happy to report we are on schedule. >> are they upset it isn't enough money? not yet. they will be. we'll save that for when they come to us. [laughter] there is a cap if i'm not mistaken. >> correct. >> they can go to the irs.
>> alright. colleagues. >> is the testing happening is that on the controllers end? >> [inaudible] through the processing of the paperwork, through the hand processing for example, if you are aplaying for a loan related to a mortgage you have to provide documentation and we are also testing through a full pay roll cycle the repayment can be loaded into the city pay roll system and be deducted from someones pay check. it is a full cycle, that is why we are on schedule, but we have to test not only the customer experience, the processing as well as insure that the payments can be loaded into pay roll. we have no red flags at
this point. >> the process was held up by testing because of emerge and the pay roll system? >> that is correct >> we have gotten past that now? >> we have. >> is that we are more confident in the third quarter conclusion? >> we are extremely confident today compared to-and confident before. the testing so far is very successful but we need to test the entire process through the loading of the repayment into pay roll to make sure that process works. >> if you will continue to update us at each board meeting so we can track thou things are doing? >> we will probably give a notification prior to the next board meeting. we announced we are planning a soft launch so we will make sure the board
would be notified the results of our system testing. >> great. >> mr. driscoll. >> monitoring the program because the cost associated with the program will effect the whole program >> i know prudential will administer the program overseen by you and diane, but again, recently there is a lot of surveying and research and they have come to the conclusion that they find maybe 1/3 of money borrowed shouldn't have done it. that effects their plans for retirement. another education issue about do yourself a favor, don't bory if you don't need it. monitor the utilization of the issue. it is called leakage. it is up and running. it is a big chunk of data to figure how to collect and gather and analyze
it with prudentials help >> as we represented to the differed comp committee members, there will be a lot of written materials as well as materials people have to read on line before they go through with the process. we also want to report we anticipate in the next few weeks we will install a kiosk on the fifen 5th floor for people that don't have computers. the only way to apply for a loan is on line. that will provide access for folks who want to come in and apply for a loan while they are here. we expect to see that equipment, i think the desks are delivered tomorrow and computers should be set up in time for the soft roll out. >> alright. one more item. it is basically the-as you know the dol issued a rule effective
next year april 10 in 2017. we are doing due diligence how this can potentially impact government plans. at first glance we are not directly impacted because we are non [inaudible] but we are still doing due dilliance and asked [inaudible] to provide presentation on analysis at the next differed comp meeting. >> thank you for the information. i don't know if there are questions? if not we can take public comment on the item. any public comment? public comment is closed. thank you for the report, diane. item number 10, please. >> item number 10, action item revuv approval of revised resolution 44. >> resolution 44 reflects documentation of delegation of sigtory authority from the board to members oof staff and traditionally i believe we had
4 sections dealing with the execution of agreement to the investment authority to pass transfer of payment authority as well as trading authority. this year, we provided you with a updated version of what was sents out in the packet that includes a 5th delegation, which is related to the calpers agreement the city has with calpers on behalf of certain city employees. over the years calpers has recognized the executive directors statutory authority to sign on behalf of the retirement board in particularly related to disability determinations and we now have sort of a new group of folks who are processing those decision that we passed on from this body, that the
body approved to them and they requested something more formal as far as a delegation of authority. we added sub-section e to resolution 44 that would include my authority and karen [inaudible] as deputy executive director to sign on behalf of the board related to anything relate today the calpers agreement that the skity has included in particular the disability determinations so we would ask the board to approve the amended resolution number 44, so we can notify our investment managers as well as calpers of this action. happy to answer any questions you might have. >> colleagues, any questions? >> changing sigtory authority only for benefit determination
for people with disabilities? >> it actually covers contracts, contract amendments to the calpers contract, but also anything related to the administration of there calpers contract. the calpers contract, this board makes determinations related to disability for calpers members, so as well as processing applications for sfdrf disability applications. weologist process meaning we hire hearing officers and go through the whole process. in the past we satisfied and i signed a affidavit saying this is the action of the board-i don't know if there is one on this months list but you notice the calpers determinations are on the consent calendar as they come forward. reebtsly calpers wanted something more substantial as far as documentation that karen and i are authorized to sign off on
the disability determinations for them to process it. >> [inaudible] >> absolutely. yeah. it is really for their side only so we can show them the board adopted this resolution and hopefully they will accept our signatures to process disability payments. >> thank you for the explanation. >> the first time we have come up and don't know exactly why it came up at this point but figured since we are bringing to the board to update with the staff that we hired over the last year, this is a good opportunity to add this 5th piece to it. >> let's take public comment. review and approval of revised resolution 44. seeing none, public comment is closed. is there a motion to move? approved revised resolution?
thank you, i appreciate it. motion made by stansbury, seconded by mr. driscoll. without objection the motion passes unanimously. >> thank you. >> number 11, mr. clerk. >> number 11 is action item, amortization of unfunded acwaerl acrured liability at july 1, 2016 due to the 2013 and 2014 supplemental coleas payable to the post 1996 retirees >> good afternoon commissioners. this stems from the court kishz relate today the benefit and the action item is only post 1996 retirees impacted by the court decision. may seem early to discuss the amortization period but we need the decision to complete the
year end disclosure because our year end gas be disclosure discount rate is waiting of the long term expected return on assets and a bond rate and the waiting is dependent on how we will be funding the plan. i have bill haulmark and ann harper and they are going to discuss the 2013 and 14 supplemental colas. i asked them to present with 3 option squz not because i favor all 3 options equally because i want the board to see a broad set of information to make your decision. >> the computer shut down. so,
i want to move through this first part fairly quickly and get to the crux of the presentation. as mr. brasalton introduced we are addressing the two different pieces. this first slide here, slide 2, really the main thing i want to draw from that is the term ology we adopted to address the two groups. we are referring to the post 96 retirees and the group of members who worked after november 6, 1996. and the pre-97 retirees is the group retiring before november 6, 1996. um, the determinations necessitate the restoration of the 201 3 and 14 supplemental
colas and because of the timing for those two different groups we suggest the post 96 retirees should be reflected in the 2016 evaluation and pre-97 retiree impact will not be reflected until the 17 evaluations. we will show the impacts of both but are focus said on decisions for the 2016 evaluation right now. the rational for superating them is the timing of the decisions and under gas be for example, we are required to recognize the plan as it was in effect and understood on june 30, 2016 and since the boards determination was after that date, we would not recognize it as of 6-30-16.
here this table is showing the impact for the post 96 retirees as of june 30, 2016. there is a increase in the liability of about $350 million. that is the present value oof the additional benefits in the future for the 2013 and 14 supplemental colas. in addition we paid back payments for those 2013 and 14 supplemental colas resulting in reduction of assets of $78 million so it is a total of those 2 for $429 million. that is on total liability in excess of $20 billion. the primary decision that we are focused on
is how to amortize that impact. when there is a change that increasing the unfunded liability, we build it into the contribution rate and amortize it over a period of time. under our current policy, we would be amortizing supplemental colas over a period of 5 years and when the board adopted the policy the rational is this a change in benefit for retirees, people no longer working and so it should be amortized over a fairly short period and we adopted 5 years. 5 years also matches the recognition period for the assets gain because this only happens when fl are investment returns greater than expected. we as part of the assets moving we recognize that gain over 5 years and so recognizing the payment over 5 years created a nice match in terms of the
impact on contribution rates. now, before we change to that method, we have some longer methods in place and some transitions. so, if the supplemental cola had actually been granted in 2013 and recognized in 2013 and the subsequent in 2014, the 2013 piece would have 17 years left on the amortization. the 2014 piece would only have 3 years left because it would have been after the 5 year-after we adopted the 5 year method so there will be 3 years left. in general, we don't recommend such a short amortization period, so what we modeled here in this scenario is a 5 year amortization for the 2014
supplemental cola. and then the other sort of conceptual approach to think about, is that the amortization period generally especially for a retiree piece should not exceed the average expected future lifetime of the people receiving the benefit. that is the time period you will pay the benefit out of the generally dopet want to have the contributions that are supposed to pay for that extend longer than the time you are actually paying the benefit. for the post 96 retirees, that figure is 20 years. that also is the maximum amortization period under the charter, so 20 years is the maximum you could do. it would be a special exception to the funding policies that we've adopted. just to put parameters arond
the options. we got a number of projections trying to walk through step by step the impacts so you can see it. i will switch over to the live model here, but before i do that, i do want to note that in the projections there is now a much greater frequency of future supplemental colas anticipated and so those projections are reflecting that as well as the actual 2013 and 14 supplemental colas. so, i wanted to start with our projection from the last 2015 from the evoluation. down the
left side you see investment returns, aquil investment returns during the projection period. across the top we have various options to elect. we show the scenario is 2015 evaluation here. that is the key election i made on this one. the top chart the gray bars show the projection of liability going forward and green and blue line show projection of assets. across the top is projected funded status starting at 89 percent and going to 100. the bottom is contribution rate. the member rate is in the purple and the gold is the employer contribution rates. these rates are before any adjustment for cost share. these are the raw rates that we are showing
now. the red line is on top of the bars and that is our guide as we go through different scenarios to show where the baseline is. um, so, the first thing is-that projection assumed there would be no future supplemental colas at all and we are going to assume that on average that there is some. this projection everybody would have been required to be 100 percent before a supplemental cola could be paid so there is a very minor effect. and then we had put in a estimated return for the fiscal year of 1.3 percent and so you can see the effect of just having that return increases our projected
contribution rate going up. those are the things before we make any decisions and how to deal with the supplemental cola. jerk question for you. are the triggers points for prop c either 20 percent step down or 22.5 to step up on the employer rate, is that correct? >> there are a series of them at.29 and a half, 25 to 27 and a half. >> back up and then i believe it is a 4 percent gap before the next trigger points, so it would be like 26 and a half. >> 27.51. and 32. >> step down to 20 percent? >> the 22.51 >> next step down would be? >> 17?
i center have to look at up. >> i think there is one at 20. they are not evening distributed but it was at 22 and a half they put 5 percent before anything would trigger so raw numbers on this chart it would trigger up of 1 percent but wouldn't go further. >> okay, thank you. >> um, so now if i bring in the 2013 and 14 supplemental cola, for the post 96 group, and here i am amortizing it over 5 years according to these two boxes here that i selected. you can see the impact is significant
increase particularly in the short term with rates as high as 29 and a half percent before the cost sharing. >> i'm sorry, can you tell my what the change is on this versus the previous chart? >> we have a summary slide, so if you flip to-as i go through these if you follow on page 13, you can see the relative levels. >> what is added a return of 1.3 and on top of that it added the cost associated with the payment of just the post 1996 retirees supplemental colas >> right. and amortizing over 5 years.
>> amortizing over 5 years and assuming the will be paid more often to the folks and the full funded requirement is no longer applied to these folks. >> so within 5 years we increase active member contributions to the max under prop c? >> if we amortize both ov5 years, which isn't what we are recommending. >> page 10 on your paper copy. >> so, then the second alternative, which is the one that is being recommended, >> i don't think we-the time saving is different. >> there is one year difference. >> thank you. >> um, so now i just changed the amortization period for the 2013 supplemental cola to 17
years, so that is how long it would have been amortized if we had recognized it when it happened in 2013 and that is the remaining period left on the amortizationism we are still amortizing 2014 over 5 years so that brings down the peak a little bit, but it extends the rates further out are a little higher. >> it crosses trigger points? >> yes. >> in essence even if we have a longer period of time to smooth out the post 96 supplemental cola, it increase active member contribution tooz the max under prop c within 4 years? >> it would trigger just additional two percent and i
can't read the date. when it hits 28.3 and 28.4 that is additional 1 percent plus additional 1 percent. is a quarter or- >> after it goes up one it goes up a quarter. >> it is 1 and a quarter percent additional contributions once it above 27.5. >> actually, the trigger points are at-it would trigger at 32.5 is the max. actually, 35 is max and 32.5 and then >> don't like to talk big numbers. [inaudible] >> 27 and a half would trigger 1 quarter?
>> i think it is more than that for safety. >> it goes 1 and then stays at 1 for like 5 wreers years and goes a quarter after 27 and a half. >> exactly. once it hits 27 and a half it goes up a quarter and next increase is at 32 and a half. >> that goes up a quarter also. >> a quarter also. >> i think that is generalizing across the board but dependent when you were hired and the tier and your contribution can potentially go up more than 1 and a quarter? >> i believe the phasing scale is the same across all plans but i may mistaken. i believe it is the same across all plans. i think where you start can be different because if you contribute 9 percent rather than 7 and a half or 7 percent instead of 7 and a half, the additional percentages added on top of your regular
contributions, so people-you're correct, in later plans have a different starting point in safety as well-miscellaneous, everyone is 7 and a half percent accept for pre-1976 folks who are at 8. >> we can come back to that later. that isn't relevant. it is, but--[inaudible] >> so, the one other caution as we go through these and look at the projections and whether it is above or below a trigger point, remember we will have investment returns in the interim that are likely to also move it around so we can't rely too much on it being- >> yes, this is 7 and a half percent every year for the next
19 years after we made 1.3 percent the previous year. we are assuming a supplemental cola- >> we are assume here is the post 96 retiree group, that they get half a supplemental cola every year because they no longer have the full funding requirement and so we are saying there is approximately 50 percent chance we get a return bigger than the assumption and pay supplemental cola. that is built in here. we would be recognizing it when-so, in the next year we recognize half of a supplemental cola and amortize that over 5 years in accordance with current board policy. >> commissioner stansbury can
you click the e cost sharing to yes to estimate what the employee contsbutions to. 7.6 up to 11.3 at the highest. it is the average, yeah. it is averaged over all the group, but it is roughly 3 and a half, nearly 4 percent increase additional cost sharing. >> and what slide would-this is not on a slide? >> again, these are all-i like to say these are the call projections. i can guarantee they will be wrong and not make 7 and a half percent. i love to say we will make 7 and a half percent for the next 19 years, but it wone happen. it is just for modeling to demonstrate and rather dramatic impact of the court decision because this is only measuring the court decision.
>> the pre-97 are not on here sh >> correct. >> is that coming? >> [inaudible] >> then the rest i want to show is just post 96 is, if we spread it out to the max and went to a 20 year amortization. these slides are shown on slide 12. here is what it looks like. you don't get as much as a ramp up initially, but the rate stays higher longer. >> this scenario is shown because the charter basically says 20 years is the maximum but this also matches the average life expectancy of most 96 retirees, which goes to the
theory of we should fund the benefits over the average expect of life of folks receiving it. we are not necessarily recommendeding it but show this as a alternative that requires the board to grant a special exsemgz and put the basis for adopting this to be this matches the average life expectancy of this group. that is why we are presenting it to you. >> i have questions on slide 12. i see you have the 20 year moving amortization. >> thank you >> 20 year amortization. does this assume the 1.1 percent return for- >> it is 1.3. >> that is for this year,
right? >> for the year i just ended. >> and so slide 13 compares the projections we just showed. the red line being the baseline from the last evaluation and you got 1.3 percent return and impact of that and then the impact of the supplemental colas dependent which method you select. and the patterns follow sort of what you would expectment . if we amortize everything over 5 years it goes up the quickest to the highest level but drops to a lower level long term and if you spread it out over 20 years it doesn't go up as quickly but stays high longer. those are
the fundamental tradeoffs. now, we do want to show you the pre-97 retirees before you make a decision here. ann will take us through those. >> with the july last month it was decided that the no full funding requirement would also apply to the pre-97 retirees as well as post 96 retirees. what that means is the pre-97 retirees will be granted 2013 and 14 supplemental colas because there were excess earnings in those years even though the plan want fully funded and receive back payment frz the payments missed since 2013. it is our understanding that this decision since it was made at the july meeting which
is after the 71 evaluation date, does need to be recognized in the 2016 evaluation can be recognized in the 17 and this is also consistent with the accounting standards with gas be recognition requirement. just like the post-97 group there is a two fold impact on the cost. the liability increases by about $114 million and this is the expected value of the future payments of that 13 and 14 supplemental colas. also assets are impacted when we pay out back payments when chis about $34 million so the net impact is $148 million, but $150 million >> [inaudible] the amount of
money to make payments [inaudible] >> if the smooth value of assets. the impact is the same on either the market value or ac weirial value. the assets pool but we do the contribution calculations based on the ac waerl value. >> can you explain that another way, i didn't quite catch that sfwl ? >> for this purpose you don't need to worry about the acuaerial value- >> it is pulled out of assets to those benefits so you have $34 million of assets you didn't expect to pay out. >> it is cash payment of benefit snz >> correct.
>> $34 million is what we anticipate paying to the 7700 folks who retired prior to november 1996. that is ret row benefits back to the day they should have been paid without interest, with no interest on it. >> [inaudible] >> that is part of the increase in the liability. that is 114. it is $114 million is the present value of the estimated continued stream of those two colas through the expected lives of there pre-96 retirees. >> we pick up the back and forward is 148? >> correct. exactly. >> present value. >> this 34 we paid out is in september? >> yep, that is the plan to may
that out in september. >> we are looking and moving forward for this group to july 1, 2017. >> so, it is important for you to have and know what the pre-97 liability and cost impact are now so you are provided with the relevant and most recent information for context making your decision with the post 96 supplemental cola and how you make the amortization. we wanted you to have this information as well because we don't want you working in a vacuum with this. to reiterate, the funding policy is amortize the supplemental colas over 5 years and then that is your floor. and also we don't want to extend the amortization
payments past when all the pre-97 retirees will be gone so we want to make sure the benefits are paid for and funded while the retirees still receive their benefits. for the pre-97 group, the average expected future lifetime is 10 years. the average age is about 82 as a group. the projections here that we'll show, there are so many different scenarios but we'll narrow it down and look at a 5 year amortization for pre-97 group and 10 year and layer the costs on top of the costs for post 96 group. this is everything combined. the 1.3 percent return, the post 96 supplemental colas and the pre-97 supplemental colas.
this scenario shows really the floor here of-it shows the floor of the amortization period. we are saying all amortizations of the supplemental colas will be amortized over a 5 years which will increase the contribution rates at a greater rate but over the long term it is lower rate with the amortization policy. the rate goes from 21.4 up to about 31 percent before it starts to drop down again to around 26 percent. the next scenario is showing the 17 year amortization for the 2013 supplemental cola. 5 years for the 2014 and for the pre-97 retirees the additional
cost of amortizing their supplemental cola over 5 years. again, it is not as-the magnitude the increases are not as high as the 5-5 and 5. also the contribution rates goes up to about 30 percent and drops down to little higher rate than the previous scenario. really, for these two scenarios adding the pre-97 supplemental cola over 5 years increasing the rate bestween 1.2 percent and 1.4 percent on top of the post 96 retirees cola. that is the additional cost of the pre-97 supplemental cola over 5 years. >> in the first time-give the highest amount the city will pay in one year? what is it
[inaudible] >> $6.7 billion so is the pay roll so it is going to be- >> i switch to show projection of the dollar amounts the city would pay >> this is before cost sharing? >> before cost sharing. can you put cost sharing on the numbers? >> this is all employers- >> what i'm trying to get at is, >> that's little better. >> $148 million spread over how many years? >> 5 years right now. >> okay. >> we expect- >> but you amortized it over 30? >> no, we are just amortizing over the 5. >> you have to come up with you know, 5 divided by 140? is
that what they commit so it is- >> 150 divided by [inaudible] if there was no interest. >> $30 million a year. >> the last option that we are showing is where the post 96 supplemental colas are amortized over 20 years and pre-97 is amortized over 10 years and this is kind of the longest amortization period we would consider and the contribution rates gradually increases up to about 28 percent and you can see stays at that high rate for a long period of time until those
amortizations are paid off and it drops. >> the 5 years is a big hit to the city and you're considering it spreading it longer than 5, is that what i'm hearing or not? >> what we are saying is unker the court decision, if we had paid them the way the court said we should have paid them, the 17 years would be under the policy that was in effect july 1, 2013 and 5 years would be the policy that was in effect as of july 1, 2014. with only 3 years remaining the recommendation is they would never recommend amortizing over a period shorter than 5 years, so we are rounding that up to 5 and doing 2013 over the remaining 17 years as if we had paid it as a policy of the board in effect. for the pre-96 folks, it was a
discretionary decision that was made- >> you take the pre-96 money that was >> $150 million for these folks we are saying the decision was made july 1, 2016, the policy in effect was you amortize that over 5 yearsism if you want to grant exception to the policy, what ciron is saying is the average life spectancy of this group is 10 years so the maximum is amortize the costf that over 10 years and that was the last one. >> i changed it while you were talking. >> it is showing that we are actually granting the court decision as well as the boards decision as a exception and that we want to under policy amortize it over the average life expectancy of the two groups, but that is not what-
>> that isn't my preference. >> right. but it is within the board discretion. >> [inaudible] being extended. >> that is why we are showing it is this a option. >> it is a option. >> this is heavy stuff and big decision. when do we need to make a decision because i get a sense we need more time. and 1 on 1 time with you to go over the questions. i want to know, in the beginning you said you wouldn't do shorter than 5 years and 5 years is consistent with already established- >> current policy.
>> 5 years is to me seems aggressive and i just think we need a little more time. do we have the time and flexibility to continue to- >> it does impact the year ends accounting numbers. >> we can bring it back to september board meetjug still be on time for the gadsbe rortd. report. >> it was a statement, not a question. [laughter] >> the problem is, we need it to determine the discount rate for the gadsby report and do all the work to produce- >> if we miss the deadline- >> i understand . the thought i'm having is perhaps we should have a discussion with the auditors and see if we can have
a proxy for this years gadsby disclosure >> i think that is helpful so we don't have it pressure to make a decision and don't want to make your filing difficult but if you can proxy a place holder that will be helpful and/or, if there is flexibility to make a amendment to the report that we file. i don't know if that is a option as well but something to consider. >> i just want to make sure colleagues had all their questions answered. mr. driscoll has his hann up >> the issue about the decision made last month after july, i firmly believe we didn't do it nor recommend aiz or discussion [inaudible] to avoid the plan to start and when would it collect at? that was never a issue [inaudible] the money will be paid. interest
makeatize go up. i want to ask you about the lifep expectancy of the retirees to use that to justify the amortization period. you said 20 years and not sure about that number. >> we are saying that isn't to justify the amortization period, that is putting the outside parameter on the amortization period so we don't think it should go longer than that. >> the average life expectancy of the post 96 folks is 20 >> correct >> and pre-96 is 10 >> the group now note the people retiring tomorrow. people when they retire when they are 50 >> the group getting the 2013 and 14 reto supplemental cola. >> all of them >> that isn't the future folks because ant people retired in 13 and 14 get the ret row which is what we are trying to
amortize. >> the two groups get thg ret row, the post 96 group so they are younger so they have a life expectancy of the group of about 20 years. >> you in the audience outlive our projection. i don't want to put on notice 10 years. >> for the pre-97 is older group average age a 82 so their average life expectancy is another 10 years >> there is issue how they are paying for it. we are trying to connect to a person working as well. >> normally, if we had a change to someones bft benefit who was active we would look how long they are active and you want to collect the money before they retire. here, we
are already retired and we want to collect the money before we actually paid it out. so, that is the idea of it being the outer. >> prior to prop c when it introduced the employee cost sharing, the cost of this benefit for the retirees would be born by the city, by the sponsor and offset paying investment return. >> some of the original [inaudible] >> right, we won't be there now, by a long shot. >> part the reason why this looks high is because we are two years beyond our gains generated 2013 and 14. we already-the city already budgeted and they have a new budget so that is part of the reason why i felt it was good for the board to think about this and make the decision. >> the losses in the last 2 years reflected in this?
>> 1.3 percent return we have a estimate of investment loss. we have not adjusted for any of the dem graphic changes because we don't have that data yet. >> my questions are answered. >> this was very good. thank you for bringing that to us. good information. we haven't told you what a good job we think you are doing, but really good. >> if there are specific screenshots you want us to send that is a option. >> i suggest we continue this to the september board meeting and if any board members want additional information you channel it through genet and she'll coordinate with ciron to get the information back since bill and ann are not local. but hopefully they will be available to come back to the
next board meeting in september. >> thank you. let's take public comment on this item. public comment is open. public comment is closed so continue the item to september. thank you. call item 12, please. >> item travel expense report for the quartereneded june 30, 2016 >> this represents the final quarter of our budget year and you'll see that there were expenditures over $141 thousand for the quarter. the total for the year are 365, 516. 56 however that still leaves nearly-let me get to the number. 343$343 thousand that
remains in the trust as unexspected for the budget year 2015 and 16. happy to answer questions related to this quarterly report. >> any discussions? why don't we move to public comment on this item. any public comment? >> [inaudible] core spondence from dan rosenfeld and want to commend the board for standing behind the decision to give ret row active colas to the pre-19
[inaudible] and i'll follow this closely and just want to commend retirement system and the board for standing behine the pre-96 retirees. thank you. >> thank you. item 12 is discussion item only. seeing there is no discussion let's move it the next item. >> item 13, executive directors report. >> i provided you a copy of the letter i received on friday from ben rosenfield basically asking me to distribute this to the board. also the other thing i like to point out, sthr are no committee meetings in august, however we we will have a committee meeting on the morning of september 14 board meeting that will start at 10:30 and this will be a esg
committee and on september 21, we will have the investment committee meeting starting at 1 o'clock so we'll have at least two committee meetings in september. happy to answer questions you might have. >> thank you. colleagues, any questions for the director? drether huish i want to inform you that i am entertaining conversation of changing the chair of this committee of the esg. >> mr. paskin-jordan doesn't want to serve as the chair? >> i don't know if he doesn't want to, i think it is just the time. >> okay. >> um, 23 if there is no discussion we can open up to
public comment. anyone who would like to comment on the directors report? please come up. >> good afternoon commissioners. [inaudible] my only issue is on september 14 is when reccsf holds the membership meetings so can't attend the committee which has interest for a number of our members and actually for some of my [inaudible] colleagues retirees. it would be really helpful to schedule that esg committee meeting on a different date. thank you. >> okay, thanks. anyone else? public comment is closed. thank you director for the report. we will go ahead and move to item 14, please. >> item 14, discussion item. retirement borebd member good of the order.
>> colleagues, anything you like to discuss? alright. let's take public comment for the good of the order. seeing none, pucklic comment is closed mpt call item 15. >> item 15, discussion item. retirement board member reports and comments. >> any reports? take as submitted. let's go to public comment on the reports submitted on item 15? public comment is closed. item 16. >> item 16, closed session, action item continuation of item 3. >> ladies and gentlemen for your time, we need to go back into closeed session and discuss a few more items. th